Pfizer Bid for AstraZeneca Has No Guarantees for Sweden

The U.K. won a pledge from Pfizer Inc. to protect research jobs in the country should it succeed in buying AstraZeneca Plc. Sweden, the home country of AstraZeneca Chairman Leif Johansson, has received no such assurances.

Since Sweden’s Astra AB was bought by Zeneca Plc in 1999, the combined company has diminished its presence in the Scandinavian country. AstraZeneca’s workforce in Sweden now stands at 5,900, about 11 percent of the London-based company’s total and down from 8,419 in 2008 before the shuttering of research sites in Lund and Soedertaelje.

Pfizer is reassuring AstraZeneca researchers in the U.K. and the British government that it won’t gut the country’s life sciences sector. The New York-based company told U.K. Prime Minister David Cameron last week that it would keep at least 20 percent of the combined company’s research and development workforce in the U.K. for at least five years and retain “substantial” manufacturing facilities at AstraZeneca’s site south of Manchester.

“What Pfizer has promised Cameron is worrying, because that could have consequences for the operations in Sweden,” Annie Loof, Swedish minister for enterprise, said by e-mail. “We have not yet received any similar guarantees for Sweden. I have been in contact with both Pfizer and AstraZeneca and I have stated that it is important, no matter who the owner is, to keep the research and development in Sweden.”

Sweden Target

Pfizer’s global R&D workforce totals about 10,880 and AstraZeneca’s about 9,000, according to estimates by Bloomberg Industries. With fewer than 20 percent of those jobs in the U.K., employment cuts may occur outside Britain, and Sweden is a likely candidate, said Asthika Goonewardene, a London-based analyst at Bloomberg Industries.

“It is premature to speculate at this stage on the exact research mix and location of specific R&D operations,” Andrew Widger, a spokesman for Pfizer, said in an e-mailed response to questions. “We recognize that, like Pfizer, AstraZeneca also has world-class science and scientists.”

Pfizer is considering its next move after AstraZeneca last week rejected a sweetened bid of about $106 billion. It will be able to address specific aspects of a combination if a transaction is agreed upon, Widger said.

Moelndal, near Gothenburg, is the site of one of three strategic global R&D sites at AstraZeneca, employing 2,200 workers, according to the company. Scientists at Moelndal discovered and developed the heartburn pill Nexium, a blockbuster that earned $3.9 billion in sales last year. A manufacturing site in Soedertaelje accounts for 3,700 jobs.

Life Sciences

“It will of course have implications for Swedish life sciences if they review those operations,” said Ingrid Heath, head of policy at SwedenBio, a trade group.

Unlike the U.K., which has “a very active” life sciences strategy that examines tax incentives for research and how hospitals use new medicines, Sweden hasn’t had such a “comprehensive approach,” she said.

Pfizer Chief Executive Officer Ian Read and Pascal Soriot, his counterpart at AstraZeneca will testify at two separate British parliamentary committees next week, according to the panels. Lawmakers intend to scrutinize the pledges made on research and development.

Sweden has little ability to stop a takeover. While such transactions must be approved by competition authorities, they’re primarily a matter for shareholders, not politicians. As an economy relying on the rest of the world for trade, Sweden accepts that foreign companies will make acquisitions, according to Karin Olofsdotter, a senior lecturer in economics at Lund University.

‘Open Nation’

“Sweden is aware that it is a small, open nation,” Olofsdotter said in a telephone interview. “There is generally a positive attitude towards globalization. It is very important for Swedish companies to win market shares abroad, and then one also has to cope with the fact that foreign companies will operate in our market.”

Finance Minister Anders Borg warned U.K. Chancellor of the Exchequer George Osborne at a press conference yesterday in Brussels that guarantees by a bidding company to safeguard jobs may not be kept, according to news agency Direkt. Sweden has firsthand experience, and the lesson came from Pfizer itself.

“Pfizer took over Pharmacia a few years ago and then gave rather strong assurances that they would invest in research in Sweden,” the finance minister told reporters. “We can see that those assurances had a very weak effect.”

‘Naïve’ Hope

The U.S. drugmaker bought Pharmacia Corp., the product of a merger of Sweden’s Pharmacia AB and Michigan-based Upjohn Co., in 2003, and has reduced its presence in the Scandinavian country since then.

“The Swedish activities of Pharmacia today are hardly a shadow of their former self,” said Arne Bjornberg, chairman of Health Consumer Powerhouse, a research firm in Stockholm, and a former director of life sciences consulting at KPMG. “It would be naïve to believe that Pfizer will keep running research centers all over the planet.”

While Sweden’s medicine sector isn’t completely dependent on AstraZeneca -- the country has almost 100 biotechnology and pharmaceutical companies actively working on drug development as of last year, including Swedish Orphan Biovitrum AB and Medivir AB, according to SwedenBio -- the government has applied pressure for job guarantees with other deals.

Scania Takeover

After Volkswagen AG bid to take over the rest of Swedish truckmaker Scania AB, Borg said in February that Scania “must defend the jobs in Sweden.” Unions won guarantees that the headquarters would remain in Sweden and got veto rights over any relocation of production facilities.

Investor AB, the holding company of Sweden’s Wallenberg family that owns about 4 percent of AstraZeneca, agreed to tender its Scania shares to Volkswagen. It “supports the view of AstraZeneca’s board” in the Pfizer approach, spokesman Stefan Stern said in an e-mail, declining to elaborate. Marcus Wallenberg serves on AstraZeneca’s board.

The U.K.’s opposition Labour Party is urging a test on whether AstraZeneca is a “national interest,” and London Mayor Boris Johnson has called for caution on the deal while research and development implications are made more clear. Cameron said today that he’s “not satisfied” with the job assurances.

In his letter to Cameron, Read told the prime minister that the combined company would complete the planned AstraZeneca science hub in the university town of Cambridge.

Boel Godner, the mayor of Soedertaelje, sees the writing on the wall for her Swedish city.

“There is a constant worry about the jobs at AstraZeneca,” she said by e-mail. “We’re not naive. We have in the past few years in Sweden learned that there can be rapid changes at large companies.”

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